Offshore outsourcing vendors like to highlight hourly rates because they sound pretty low when compare to the equivalent rate for US-based engineers. But that is far from the reality of the Total Cost of Engagement (TCE), which is what you are going to end up paying.
To the cost of the engineering talent you must add the cost of additional management, travel costs, the painful cost of staff turnover, and a certain amount of productivity loss due to the distance and degraded communications.
No matter what the size of the project, you need to have a US-based manager in charge of the outsourced project to keep track of every aspect of it and to make sure that everybody is in sync. This is true regardless of the outsource locale, be it offshore, nearshore or onshore.
You need to have a technical lead for every five or six offshore engineers. These leads act as the bridge between the offshore and US teams and must, therefore, work a shift that overlaps both teams. They must be senior enough to be able to track the work done by both teams without becoming a burden to either team. They must also understand the implications of daily decisions, and be able to clarify any misunderstandings before they create a crisis.
Without the appropriate talent in this role, a few things are likely to happen,
An ugly, unspoken component of the overall cost is staff turnover. Losing an engineer means that you’ve lost all the training you invested in him/her and now you have to spend time and money to find and interview a replacement. Then, you have to train the replacement.
This is very negative for team morale, for both the offshore team and the US-based team.
For every three engineers in India, expect the output of two US-based engineers. There are plenty of great engineers the world over and particularly in India, but most of the people your outsourcing vendor will attract (and retain) will be entry level people with modest skills.
The engagement manager must visit the remote site at least once every six months. Lots of thing can change in that time and it may be very costly not to take a look for yourself on a regular basis.
As of the time of this writing, a trip to Bangalore cost $1,700. Coach. Without delays, the trip takes 22 hours (which you won’t want to do in coach class a second time). For less time and money you could travel every other month to Mexico. Without the jet lag.